* HSI -1.2 pct, H-shares -1.0 pct, CSI300 -0.1 pct
* Shanghai Composite to have biggest quarterly gain since Q4 2009
* Trading volumes dim ahead of one-week China holiday
* China coal sector jumps on tax change (Updates to midday)
By Grace Li
HONG KONG, Sept 30 (Reuters) - Hong Kong shares sank to a three-month low on Tuesday, ahead of holidays, as investors steered from risk as they wondered when the city's worst unrest in decades would end and what China's response would be.
Tens of thousands of pro-democracy protesters blocked Hong Kong streets on Tuesday, in one of the biggest political challenges to Beijing since the Tiananmen Square crackdown 25 years ago.
"At a minimum, such political ructions this time offer a concrete catalyst for investors to reduce Hong Kong exposure on increasingly adverse macroeconomic considerations in any case," Nomura said in a research note.
China shares also weakened in choppy trade, after a private survey pointed to a still-sluggish economy facing considerable risks, though the Shanghai benchmark was still heading for its biggest quarterly gain in more than four years.
Hong Kong's Hang Seng Index was down 1.2 percent by midday at 22,950.66 points - its lowest since June 26 - and appeared on track for a fourth straight daily loss. The China Enterprises Index of the top Chinese listings in Hong Kong fell 1.0 percent.
On the quarter, the indexes were down 1.0 percent and flat, respectively.
The CSI300 of the leading Shanghai and Shenzhen A-share listings and the Shanghai Composite Index, which stood at 2,355.30 points, each slipped 0.1 percent.
On the quarter, they were up 12.9 and 15.0 percent, respectively.
The final HSBC/Markit Manufacturing Purchasing Managers' Index(PMI) hovered at 50.2 in September, unchanged from the August reading which was a three-month low, but below than a preliminary reading of 50.5.
China's official PMI is due on Wednesday and analysts look for a steady outcome around 51.0.
Volumes in both Hong Kong and mainland markets were light ahead of a holiday. Hong Kong will be shut Oct. 1 and 2, and the mainland Oct. 1-7.
Real estate developers were the top percentage losers on the Hang Seng. Cheung Kong Holdings shed 2.5 percent, Henderson Land lost 3.0 percent, and New World Development slid 2.8 percent.
"Local property business would be affected more" than other sectors by the protests, said Alex Wong, director of asset management at Ample Finance Group. "If any downgrade happens to Hong Kong, then of course property would be hurt most."
Fitch and Standard & Poor's said on Monday that clashes between Hong Kong police and pro-democracy supporters won't significantly affect the city's credit ratings in the short term unless they last long enough to have a material impact on the economy.
Some retailers extended losses. Italian luxury fashion house Prada SpA, whose shops had to close earlier on Monday, was down as much as 3.3 percent.
In Shanghai, recent outperformers retreated, dragging the index down, while coal producers posted solid gains after the State Council published new measures to simplify the tax structure for the struggling industry. (Editing by Richard Borsuk)